Tech start-up Pygg went public today with a new app that allows consumers to send and receive money through social networks, but doubts loom over the perceived security of such systems.
Pygg is backed by tech seed fund Pollenizer, along with Yahoo!7 chief executive Rohan Lund and Tim Howard, chief financial officer of Vividwireless, a division of Seven Group Holdings.
Pygg gets its name from the old English term for clay jars, which villages used to share and protect valuables. The “pygg jar” later turned into the “piggy bank”.
The company is hoping to be a disruptive force within payments. Customers who create a Pygg account – currently limited to $100 – are able to transfer money instantly to friends via Twitter.
Pygg, which hopes to expand to email and Facebook, is built around the idea that consumers will use social networks to make small payments, such as paying back a friend for a coffee.
The company makes its money by charging a $2.50 transaction fee when a user deposits funds into their account.
It hopes to be exempt from RBA regulation in the form of a purchase payment facility because it has less than $10 million in liabilities.
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According to Howard, there are no equivalent examples of Pygg in other parts of the world.
“Rohan and I share a common ideology about the disruptive possibilities of technology and the internet… There are emerging examples of digital wallets but this is about it,” he says.
Howard believes the rapid take-up of smart phones and social media will spread to other industries, including financial services.
“Similar to the telco sector, there are big incumbents [in financial services]. They’ve got the innovation dilemma in that it is very difficult for them to cut their own lunch,” he says.
But it seems the innovation dilemma doesn’t apply to the banks – ANZ already has an application available to anyone with an Australian bank account, including non-ANZ customers.
goMoney enables transactions between individuals using a mobile phone number as identification. A secure website completes the transaction and, unlike Pygg, the app is free.
Meanwhile, the Commonwealth Bank is expected to release its own version of a mobile payments application tomorrow.
CBA’s flagship banking app has already been downloaded 1.9 million times.
Regardless of the growth of mobile payment systems, research suggests consumers are still wary of the security surrounding these payment methods.
A recent report by PayPal reveals Australians continue to perceive face-to-face transactions as the most secure form of making a purchase.
“Consumers rated purchasing online via a mobile device with the lowest rating in terms of security,” the report says.